Microsoft has announced details of the next version of Small Business Server (SBS) - actually, make that two versions.

SBS 7.0 is an update of what we have seen before, a bundle of core applications including Exchange 2010, SharePoint, and System Update Services, tuned to run on a single Server 2008 R2 box.

SBS codename Aurora by contrast is a new thing, and designed as a gateway to cloud services as well as managing the local network, and is aimed at businesses with five to 25 users. Both versions will be released as public betas by the end of August.

Small Business Server has always been a curious beast. As an all-in-one package with a user-friendly console, it looks just the thing for small organisations that lack dedicated IT staff, but underneath the façade lurks all the complexity of Enterprise Windows.

SBS is fine when well-managed, but often this is not the case and it becomes a burden. Some businesses have noticed that Windows Home Server has a lot to offer. It is cheaper, easier to manage, does useful things like backing up client PCs, and has storage you can expand simply by adding a new hard drive, without worrying about drive letters.

Microsoft has noticed too. SBS Aurora is built on the same codebase as Windows Home Server 2.0, codenamed Vail. It does not come with any server applications to speak of, but does include Active Directory, which is necessary to make sense of user management and permissions across a local network. It also includes federated identity services, which means that user have a single identity that applies both locally and on hosted services such as Exchange and SharePoint, so long as the provider supports it.

Like Windows Home Server, SBS Aurora is designed to be headless, managed through a remote dashboard. In itself it does not do that much; product manager Michael Leworthy described it as "a plumbing infrastructure box". There are a few things built in, starting with user management, which is a simplified wrapper for Microsoft's Active Directory. Like other versions of SBS, Aurora must be the first Windows domain controller, and cannot join an existing domain.

Next comes computer management, where you can add and remove computers from the Windows domain and configure their backup. Windows client PCs are automatically backed up to the server. If you need to do a bare metal restore, it is a matter of booting from a DVD or USB drive, connecting to the server, and rebuilding the client from the backup image.

The server itself is backed up to external USB drives. Unlike previous versions of SBS, Leworthy said that Windows Home Edition and even Apple Mac clients are allowed, though there are limitations. For example, Windows Home Edition cannot join a domain, so users have to authenticate with password prompts.

The server folders and hard drives section of the dashboard lets you manage storage. Provided more than one physical drive is installed, files are duplicated by default to protect against drive failure. The storage pool looks to the user like a single large drive, as in Windows Home Server.

Remote Web Access is a secure web site through which users can access shared folders or connect to computers by starting a remote desktop session.

SBS Aurora is Microsoft's belated attempt to make sense of what sort of server a small business actually needs in the cloud era. It is arguable that they do not need a server at all but the truth is that a Windows network runs better with Active Directory and simple things like shared folders are still useful. The idea is that third parties will create cloud services that support Aurora's federated identity services, supported by a new add-in SDK.

"You can see this whole platform exploding," Leworthy said.

As so often with Microsoft, it is conflicted about this cloud thing. Towards the end of our briefing, Leworthy spouted the party line. "For organizations with existing SBS infrastructures, our recommendation to them is to look at SBS 7.0."

In other words, rather than migrate its small business customers towards cloud services, Microsoft wants to keep them running on-premise Exchange, SharePoint and the rest, and to reserve Aurora for new customers. While some small businesses will have good reason to stick with on-premise applications, there will be others for whom the stripped-down Aurora makes better sense.

Microsoft has been working on Active Directory Federation Services (ADFS) for years, and it is interesting to see it now turn up as a central component in Small Business Server. If you accept that a hybrid cloud and on-premise system is a good idea, ADFS makes sense as a way to get there.

The doubt is whether the company will really get behind Aurora, or whether it will languish as its partners stick with the familiar and profitable complexities of the traditional SBS, but risk having their customers ditch the lot and go Google. ®